Staying on top of health insurance laws in California isn’t optional—it’s vital. With healthcare costs rising and compliance rules evolving, employers across San Diego must understand how ACA California standards shape their responsibilities, risks, and opportunities in 2025.
Whether you’re a small business navigating insurance compliance CA or an HR director overseeing dozens of employee policies, this guide breaks down the key legal updates and requirements you need to know to remain compliant and competitive.
What Is ACA and Why Does It Matter?
The Affordable Care Act (ACA) set the foundation for national health coverage reform. But ACA California refers to how these federal laws are implemented, extended, and enforced within the state. California has taken the ACA a step further with stricter mandates, expanded eligibility, and more detailed reporting expectations.
For San Diego employers, this means:
- Offering Minimum Essential Coverage (MEC) that meets both federal and California standards
- Ensuring affordability thresholds are met
- Reporting employee coverage to both the IRS and the California Franchise Tax Board
- Educating Medicare-eligible employees about their rights
Key 2025 ACA California Requirements for Employers
| Requirement | Applies to | Action Needed |
| Minimum Essential Coverage (MEC) | All businesses offering group plans | Ensure health plans include required benefits under ACA California |
| Affordability Threshold | Employers with 50+ full-time workers | Premiums for employee-only coverage must not exceed 8.39% of household income |
| 1095-C Filing | Applicable Large Employers (ALEs) | File forms with IRS and CA FTB |
| Medicare Coordination | Employers with 20+ employees | Educate workers turning 65 on Medicare vs. group plan coverage |
| Cal-COBRA | Employers with 2–19 employees | Offer continuation of coverage after qualifying events |
Health Coverage Law and Medicare Eligibility
As your workforce ages, employees may begin to qualify for Medicare. But under both ACA California and federal law, employers must:
- Continue to offer group coverage regardless of age
- Avoid pressuring employees to drop their employer plan for Medicare
- Educate employees about coordination of benefits between Medicare and employer-sponsored insurance
If your plan qualifies as creditable coverage, employees may delay enrolling in Medicare Part B or Part D without facing penalties. That’s why it’s critical to understand how Medicare eligibility interacts with ACA regulations.
Common ACA California Health Insurance Terms
Familiarizing yourself with key insurance language is half the battle when navigating ACA California compliance:
- Applicable Large Employer (ALE): A business with 50+ full-time equivalent employees.
- Minimum Essential Coverage (MEC): The base level of insurance coverage required under ACA.
- Creditable Coverage: Health coverage that meets Medicare’s standards for prescription drug plans.
- Special Enrollment Period (SEP): Time outside of open enrollment when employees can make coverage changes due to life events.
- 1095-C Form: IRS form used by employers to report health insurance information.
ACA California Penalties: What to Watch in 2025
Failing to meet ACA California requirements isn’t just risky—it’s expensive.
| Violation | Penalty |
| No coverage offered (50+ FTEs) | $2,970 per full-time employee, minus first 30 employees |
| Unaffordable or inadequate coverage offered | $4,460 per employee receiving subsidies through Covered CA |
| Failure to submit 1095-C forms | Up to $290 per form (IRS) + penalties from California FTB |
| Miscommunication about Medicare eligibility | Potential legal disputes and employee fines |
Need help understanding where your business stands? Partnering with a broker who understands ACA California can help mitigate these risks.
At Regency West Insurance, we specialize in helping San Diego businesses navigate ACA California requirements without the stress.
Schedule your benefits consultation at Regency West Insurance.
Frequently Asked Questions (FAQs)
1. What exactly does ACA California require me to offer as an employer?
ACA California requires employers to provide health plans that meet Minimum Essential Coverage (MEC), are affordable under IRS thresholds, and include essential benefits like preventive care, maternity, and mental health services. Employers must also report this coverage to the IRS and state tax agencies.
2. If I have fewer than 50 employees, do ACA California rules still apply?
You are not classified as an Applicable Large Employer (ALE) under ACA if you have fewer than 50 FTEs, so you’re not federally required to offer insurance. However, you are still subject to California’s individual mandate and must provide Cal-COBRA continuation coverage if you offer group health plans.
3. How does Medicare factor into ACA California compliance?
Employers with 20 or more employees must continue to offer their group plan to workers even after they become Medicare-eligible. You must also help those employees understand how Medicare and group plans coordinate to avoid late enrollment penalties. Offering creditable coverage is key.
4. What does insurance compliance mean for my business in 2025?
Insurance compliance refers to the specific set of health insurance laws and regulations that California employers must follow, in addition to federal Affordable Care Act (ACA) requirements. In 2025, this includes:
- Providing Minimum Essential Coverage (MEC) to eligible employees
- Ensuring coverage is affordable (costing employees no more than 8.39% of household income)
- Filing health coverage information with both the IRS and the California Franchise Tax Board
- Offering Cal-COBRA continuation coverage if you have between 2 and 19 employees
- Educating Medicare-eligible employees about their rights and coverage coordination options
Being compliant means offering legally required benefits, keeping proper documentation, and submitting annual reports on time to avoid fines.
5. Do I still need to offer health insurance if I have fewer than 50 employees?
Under ACA California rules, businesses with fewer than 50 full-time equivalent (FTE) employees are not considered Applicable Large Employers (ALEs) and are not federally required to provide health insurance. However, California still requires residents to carry insurance or face a state tax penalty. Offering insurance—while not mandatory—can:
- Make your business more competitive when hiring
- Qualify you for Small Business Health Care Tax Credits
- Improve retention and morale
If you choose to offer coverage, your plan must still meet insurance compliance CA standards, including MEC and affordability rules.
6. How do I determine if my coverage is “affordable” under ACA and California law?
For 2025, coverage is considered affordable if an employee’s share of the lowest-cost self-only premium does not exceed 8.39% of their household income. Employers typically use one of three IRS-approved affordability safe harbors:
- W-2 wages
- Rate of pay
- Federal poverty level
Failing to offer affordable coverage can lead to fines under both ACA California rules and state-level insurance compliance CA standards. Working with a broker can help calculate affordability correctly and ensure compliance.
7. What role does Medicare play in health coverage law for employers?
If you have employees approaching or over age 65, Medicare eligibility becomes a key consideration in your compliance efforts. Here’s what you need to know:
- Employers with 20+ employees must continue to offer group coverage and cannot require employees to enroll in Medicare.
- Your group health plan is considered primary, and Medicare becomes secondary.
- You must provide creditable coverage notices for Part D (prescription drug coverage) to help employees avoid penalties if they delay Medicare enrollment.
Not understanding these coordination rules could result in coverage lapses or fines, so it’s a critical part of insurance compliance CA responsibilities.
8. What penalties might I face for non-compliance in 2025, and how can I avoid them?
The penalties for non-compliance vary depending on the size of your business and the type of violation. In 2025:
- Federal ACA penalties for large employers can be over $2,900–$4,400 per employee annually.
- California state penalties apply for not submitting 1095-C forms or failing to offer MEC coverage, enforced through the Franchise Tax Board.
- You could also face liability if an employee qualifies for subsidized coverage through Covered California because your plan was unaffordable or inadequate.
To avoid penalties:
- Offer compliant coverage that meets MEC and affordability standards
- File IRS and California health forms on time
- Keep detailed records
- Consult with an experienced broker like Regency West Insurance to stay on top of changing rules